Spending cuts are necessary but not sufficient

Tim Montgomerie

Today's growth figures are no reason to panic. In an article for the London Evening Standard George Osborne blames the worst weather conditions in one hundred years for the decline. In an interview for Five Live he mentioned the wintry conditions TWELVE times! Even more relevant is the fact that every recession since quarterly records began has involved at least one quarter of contraction during the recovery phase. A number of those urging spending cuts (eg Andrew Lilico) have always said there was likely to be a contraction in GDP about now that was nothing to do with the spending cuts programme. And, lest we forget, spending is still going UP at the moment. The British state spent more money last month than it has ever spent in history.

George Osborne must not U-turn on his spending plans and I don't expect him to. Even a small wobble in resolve would send a message of weakness to global investors. They would demand a premium on lending to Britain and the cost of servicing Britain's debts would rise. That would mean less money for schools, hospitals and policing.

Cutting government borrowing and maintaining low interest rates is the best pro-growth policy. British industry will never be able to compete in the world if Britain becomes an indebted nation with high taxes and high interest rates to match.

My complaint about government economic strategy is the one I've been making for a long time. Osborne has taken the tough, unpopular decisions on cuts. He has not yet taken the tough, unpopular decisions on growth. Decisions that would send a 10,000 volt message to entrepreneurs and investors: Britain is THE place to do business. Although there have been some good initiatives the anti-bank rhetoric, uncertainty over financial regulation, rises in CGT, retention of the 50p tax band, higher petrol duty and green measures that will increase energy costs are actually moving Britain in the wrong direction.

This government will be re-elected if it delivers a good economy. I repeat there's no need to panic but if we want a strong economy rather than an okay economy in 2014/15 we need a special Budget from George Osborne in March.

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